Quality Control and Discreet Policy

India is steadily opening up its markets, ushering in a more trusting, less reactive and more proactive import policy regime. This shift gained momentum after the last Budget and is now further accelerated by the prospect of free trade agreements (FTAs).

When a QCO is imposed on a product, all sellers, domestic and global, small and large, new and old, have to adhere to the quality standards. Generally, new, small and international enterprises bear the brunt of it, but ultimately it is the Indian consumer who suffers.

The problems with implementing QCOs in India include the cost of testing and evaluation, the need for certification, unclear or inappropriate specifications, complex evaluation processes, lack of facilities and manpower, delays, etc.

Note that smaller enterprises are often more affected because they are more dependent on a single product, and have to bear costs disproportionate to their size. This reduces the ease of doing business.

Why are QCOs implemented at all? Core reasons is to stop avenues and substandard products, the government imposes minimum acceptable quality standards to ensure better quality in the market.

But here is an interesting point: In a dynamic, growing economy, the equation of value and quality should be across all products and market segments. In a mature market, low-quality goods are as valuable as high-quality ones. This diversity makes manufacturing flexible, aids innovation, gives customers a wide range of options and also leads to inclusion.

In any market, both buyers and sellers can identify quality differences. Even if they are unable to check quality before buying, once substandard goods are introduced, the seller’s reputation and sales are affected.

There is another reason for implementing QCOs in India. That reason is to protect a sector from imports. India has imposed most QCOs in those product categories where there is a lot of imports.

Generally, various forms of protectionism are used to protect weak and small enterprises. But many times QCOs save big companies but affect smaller companies and consumers.

This trend is not necessarily intentional but may be a result of the political economy of the industry. Big companies always have better resources than smaller companies.

Now that India is emerging as a mature economy and a manufacturing hub, policy measures will also have to be used judiciously.

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